Welcome back to the third part of the series on building wealth and the new millionaires. Today we focus on millionaire demographics.
If you haven’t read the first two articles in the series, do that now. Part 1 introduced you to 5 key strategies from Dividends Diversify to Build Your Wealth.
Part 2 introduced you to my mini-research study on the new millionaires. The point is to see what we can learn from them. And, what we can learn about them.
What Is The Approach?
I’m comparing today’s millionaires with those highlighted in the book, The Millionaire Next Door. In addition, I am comparing what I learn about their habits to my 5 wealth building principles at Dividends Diversify.
My sources included the following:
- personal finance websites
- wealth management and encore feature sections in the Wall Street Journal
- investor profiles provided by mutual fund companies
- discussions with family and close friends
- academic research
- a few associates I consult with regarding their money
After collecting the data over the past year, I put it all together and created a set of Dividends Diversify new millionaire statistics.
Are my sources and research methods perfect? Probably not. Are they statistically valid? No.
Rather, I think they are credible enough to learn a few things and draw some conclusions about millionaires these days. I call them the new millionaires.
So to become a millionaire, let’s learn about them.
New Millionaire Demographics
Here is some demographic information on the group I studied:
Marital status: 90% married; 10% divorced and now single. Those married have been so for an average of 18 years.
Average Millionaire Age: 46 years old with a range from the mid-’30s to the upper 50’s.
Where they live: Mostly in US urban population centers. Some in the city, most in suburbs. A couple of study participants lived in mid-size towns. No one considered themselves living in a rural area.
Working: Yes. At least one partner in the household was working full time. In about 30% of the households, the 2nd spouse was also working.
If the 2nd spouse was not employed, they were usually a stay at home Mom or Dad. Despite being millionaires, no one considered themselves retired.
Occupation: The overwhelming majority were Corporate professionals. They ranged from managers, directors and senior executives.
None owned their own business as their primary source of income. A few had small business initiatives on the side. They mainly consisted of rental properties. There were a few other types of occupations represented like doctors, lawyers, and accountants.
State of mind: Upbeat about money and life
Kids: 90% had children. 2-3 was the norm.
Homeowners: 100% owned their primary residence.
The definition of net worth is all assets including primary residence minus liabilities including any mortgage on that residence. On average, the group had a net worth $2.8 million.
One outlier was greater than $10 million. If you drop them out, the average was $2.3 with a range from a little over $1 million to less than $5 million.
Millionaire Demographics – Active Income
The average household had an active annual income of a little over $300,000. Active income means earnings from their job or active endeavors like managing rental properties. It does not include passive forms of income from dividends and interest.
Comparisons To The Millionaire Next Door Demographics
On average, here’s how my study group (DD study) compared to the demographics from The Millionaire Next Door (MND Book) published in the mid-1990s:
|Demographic||DD Study||MND Book|
|Millionaire households in the US||11.8 million||3.5 million|
|2nd Spouse Works||30%||50%|
|Average Net Worth||$2.8 million||$3.7 million|
|Median Net Worth||$2.3 million||$1.6 million|
A Broader View Of Millionaire Statistics
Before draw conclusions, I also want to offer up a broader view of millionaire demographics and statistics. You may be asking how many millionaires are in the US?
This is according to The Spectrem Group’s Market Insight report. In 2018, the number of millionaire households in the US with a net worth of at least $1 million was 11.8 million. Source: Spectrem Group
Also, in 2018, there were 127.6 total households in the US.
Doing some simple math that means only 9 out of every 100 households in the US has reached millionaire status. You can then conclude that the odds of becoming a millionaire in the US is about 9 chances out of 100 or 9%.
I wanted to give you that broader perspective, but let’s get back to comparing the new millionaires from my study to the Millionaire Next Door.
Millionaire Demographics – Conclusion
The DD study group of millionaires is younger and earns more money.
Millionaire Earnings & Net Worth
Earnings levels probably have a lot to do with inflation. But, they have a lower net worth. Being that they are younger, they have time to catch up. They have not enjoyed the extra 11 years of compounding like the households in the MND.
Fewer Millionaires Are Self-Employed
It appears today that more millionaires are corporate professionals. With more than 4 times as many millionaire households in the US today, they had to come from somewhere.
The corporate world is producing a higher share, in my opinion. The rise of the technology sector alone has to account for many Corporate professional millionaires. The likes of Microsoft, Apple, Facebook and Alphabet barely existed at the time of the MND research. Like most people with money, these millionaires started with nothing.
In addition, the economy is now more globalized. Career skills are more advanced and specialized in some cases. Advanced management and technical skills likely pay more than the more homogeneous Corporate skills demanded in the ’70s, ’80s and 90’s when the MND research was performed.
A Reduction In Working Spouses In Millionaire Households
With the rise of the dual-income family over the past couple of decades, I was surprised to see a reduction in working spouses. And even considering the substantial wealth, every household had at least one working partner.
Be sure to read all the articles in this series:
- Build Your Wealth | Part 1
- The New Millionaires | Introduction | Part 2
- The New Millionaires | Demographics | Part 3
- The New Millionaires | Income & Net Worth | Part 4
- The New Millionaires | Income versus Expenses | Part 5
- The New Millionaires | Concluding thoughts | Part 6